October 18, 2010
TIRUS GITAO, PLAINTIFF,
DIRECTV, INC., DIRECTECH, INC., DIRECT TV CORPORATION, CHARLES MERCADO, SHREEJI HOLDING, INC., NIRESH PATEL, AND ACUTE SATELLITE TV, DEFENDANTS, AND DIRECTV AND DIRECTECH, INC., DEFENDANTS/THIRD-PARTY PLAINTIFFS-APPELLANTS,
ACUTE SATELLITE SERVICES, WESTERN WORLD (CMM) C/O, OTTERSTADT AGENCY-ENG, CLFS., THIRD-PARTY DEFENDANTS, AND ESSEX INSURANCE COMPANY, THIRD-PARTY DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-4360-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 5, 2010
Before Judges Skillman, Yannotti and Espinosa.
Defendants/third party plaintiffs, DirecTV, Inc. (DirecTV) and DirecTech, Inc. (DirecTech) appeal from two orders that resulted in the denial of coverage and a defense to DirecTech based upon an endorsement naming it as an additional insured. We reverse and remand for further proceedings.
The underlying personal injury lawsuit was filed in July 2005. Plaintiff Tirus Gitao alleged he was injured in September 2004 when he fell over unattended wires left in the stairway and hall of an apartment building where DirecTV broadcast satellite services were being installed. In addition to claims against the owners/managers of the building, plaintiff's first amended complaint alleged causes of action against DirecTV and DirecTech. The third count avers, in pertinent part:
2. At the time and place aforesaid, Defendants, DIRECT T.V., DIRECT TECH, INC., . . . and ACUTE SATELLITE T.V., . . . are the individual(s), partnership(s) or corporation(s) that were present at the aforementioned location installing cable television service. Said Defendants negligently, carelessly and negligently installed the cable television service causing Plaintiff to sustain serious personal injuries.
3. At all times mentioned herein, the aforementioned Defendants were under a duty to properly install the television service at said property, through their agents, servants and employees, and to use reasonable care to prevent injuries to persons lawfully present upon said property, such as the said Plaintiff.
4. Notwithstanding the Defendants' duties, and in direct violation thereof, the Defendants, through their agents, servants and employees, carelessly and negligently caused and allowed to exist thereon a negligent, unsafe, dangerous and hazardous condition, and Defendants were further negligent in failing to warn said Plaintiff as to the existence of said dangerous and hazardous condition.
The fourth count, the only other count in which these defendants are named, states in pertinent part:
2. The aforesaid Defendants, individual and/or through their agents, servants and employees, in violation of the duties placed upon them did on said date and time, and for a long time prior thereto, negligently installed the television service and negligently placed the materials needed in order to do so at said premises in a dangerous, unsafe and irregular manner, which was continued and permitted to remain in such a state, and so unguarded and unprotected as to cause, constitute and create a nuisance and a hidden trap to anyone lawfully present upon same, such as Plaintiff.
It is undisputed that the installation services at the location where plaintiff was injured were performed exclusively by Acute pursuant to a Sub-Alternative Fulfillment Service Agreement (the Sub AFSP Agreement) with DirecTech, an authorized alternative fulfillment service provider of DirecTV. It is also undisputed that no representative of DirecTech or DirecTV was present or involved in the installation.
Under the terms of the Sub AFSP Agreement, Acute was required to indemnify, defend and hold harmless DirecTV and DirecTech "from any and all costs, expenses, liability, claims, judgments, lawsuits and demands (including attorneys' fees) arising out of . . . (b) the negligence . . . on the part of any employee, agent, servant, subcontractor, or representative of [Acute] in connection with the performance of its obligations under this Agreement . . . ." Acute was also required to obtain commercial general liability insurance with limits of no less than $1 million combined single limit of liability with coverage for personal injury. The Sub AFSP Agreement also required that "the liability policies shall be primary coverage and shall name DIRECTECH, DIRECTV, their subsidiaries, employees and affiliates as additional insured's [sic]."
Pursuant to this contractual obligation, Acute named DirecTech as an additional insured on its commercial general liability insurance policy with Essex Insurance Company (Essex) for the policy period August 3, 2004 to August 3, 2005 (the Policy). The applicable endorsement, also effective August 3, 2004, identified DirecTech "as an additional insured under this policy, but only as respects negligent acts or omissions of the Named Insured [Acute] and only for occurrences, claims or coverage not otherwise excluded in the policy."*fn1 The endorsement also provided, "It is further agreed that where no coverage shall apply herein for the Named Insured, no coverage nor defense shall be afforded to the above-identified additional insured."
After this lawsuit was filed, DirecTech's insurance carrier, Westfield Insurance Company (Westfield), tendered the defense of DirecTech to Essex. By letter dated September 28, 2005, Essex "acknowledge[d] that DirecTech is a limited Additional Insured under the Essex policy[,]" and stated that Essex would share in DirecTech's defense expenses with Westfield "on a 50/50 basis subject to a Reservation of Rights." There is nothing in the letter to inform that, contrary to this offer, Essex had determined that a defense was not owed to DirecTech under the terms of the Policy. Moreover, although written approximately two months after the amended complaint was filed, the letter fails to identify any claims alleged in the complaint as excluded from coverage under the Policy.
In identifying its full reservation of rights, Essex cited the language of the endorsement, stated that it would not indemnify DirecTech for its own negligence and that "any award of damages or damages in general apportioned to DirecTech are their sole responsibility and not that of Essex Insurance Company." The letter goes on to state that late notice is an issue in the case, discusses duties in the event of an occurrence, offense, claim or suit, and reserves all policy/coverage defenses.
In November 2006, DirecTech filed a third party complaint against Acute and Essex, seeking a declaratory judgment that Essex was required to provide coverage and a defense under the Policy.
Essex retained counsel to defend Acute, but not DirecTech, in the underlying personal injury lawsuit and in the third party action. After discovery was completed, Essex and DirecTech each moved for summary judgment seeking a declaration as to Essex's obligation to provide coverage and a defense to DirecTech. The motion judge denied both motions without prejudice. In setting forth his reasons regarding DirecTech's cross-motion, the judge stated that it must be denied since ultimately a jury must determine if Acute was negligent before both 'complete defense and indemnification by Essex' pursuant to the terms of the policy, . . . can be definitely determined.
Directech [sic] would only be entitled pursuant to said insurance policy, to recover defense costs, inclusive of counsel fees, and indemnification if Acute is found negligent in its own right.
The motion judge also granted summary judgment to DirecTV and DirecTech on their cross-claims against Acute for common law and contractual indemnification of the counsel fees and costs incurred in defending the underlying personal injury lawsuit. That order was not appealed.
The personal injury lawsuit proceeded to trial and resulted in a verdict that Acute was not negligent. Essex re-filed its motion for summary judgment and defendants filed a cross-motion, seeking a declaration as to Essex's obligation to provide indemnification and a defense to DirecTech. Viewing the motion judge's ruling as the law of the case, the trial judge granted Essex's motion based upon the jury verdict.
In this appeal, DirecTech argues that the motion judge erred in declaring that its status as an additional insured was contingent upon a jury determination of negligence by Acute and that the trial judge erred in relying upon the erroneous ruling of the motion judge.
Essex argues that the underlying complaint did not trigger any duty to defend or indemnify DirecTech because it did not assert a claim covered by the Policy. Essex contends that its duty is limited to claims that assert a cause of action for vicarious liability against DirecTech, and does not afford coverage for a claim of negligence asserted directly against DirecTech.
When reviewing a grant of summary judgment, we employ the same standards used by the trial court, which permits summary judgment if the record shows that "there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); Burnett v. Gloucester County Bd. of Chosen Freeholders, 409 N.J. Super. 219, 228 (App. Div. 2009); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). The interpretation of an insurance contract is an issue of law which we review de novo, with no special deference to the trial court's interpretation of the law and the legal consequences that flow from the established facts. Zabilowicz v. Kelsey, 200 N.J. 507, 512-13 (2009); Homesite Insur. Co. v. Hindman, 413 N.J. Super. 41, 47 (App. Div. 2010).
We interpret the language of an insurance policy by giving its words "their plain, ordinary meaning." Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001); see also Pizzullo v. New Jersey Mfrs. Ins. Co., 196 N.J. 251, 270 (2008); Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 175 (1992); Longobardi v. Chubb Ins. Co., 121 N.J. 530, 537 (1990). Where the express language of the policy is clear and unambiguous, it will be "enforced as written." Flomerfelt v. Cardiello, 202 N.J. 432, 441 (2010); Royal Ins. Co. v. Rutgers Cas. Ins. Co., 271 N.J. Super. 409, 416 (App. Div. 1994). If the terms are not clear, but instead are ambiguous, we interpret the contract in accordance with the "reasonable expectations" of the insured. Shotmeyer v. New Jersey Realty Title Ins. Co., 195 N.J. 72, 82 (2008); Proformance Ins. Co. v. Jones, 185 N.J. 406, 415 (2005); Zacarias, supra, 168 N.J. at 595.
In Flomerfelt, the Supreme Court reviewed the principles that govern an insurer's duties to defend and indemnify and recognized that "[t]hose duties are neither identical nor coextensive, and therefore must be analyzed separately." Flomerfelt, supra, 202 N.J. at 444. As a result of the jury verdict, we are only concerned with the question whether Essex was obligated to provide a defense to DirecTech based upon the claims alleged and the terms of the Policy.
An insurer's duty to defend an action brought against its insured depends upon a comparison between the allegations set forth in the complainant's pleading and the language of the insurance policy. [Ibid.]
See also Voorhees, supra, 128 N.J. at 173; L.C.S., Inc. v. Lexington Ins. Co., 371 N.J. Super. 482, 490 (App. Div. 2004). To determine whether an insurer has a duty to defend, "the complaint should be laid alongside the policy and a determination made as to whether, if the allegations are sustained, the insurer will be required to pay the resulting judgment, and in reaching a conclusion, doubts should be resolved in favor of the insured." Flomerfelt, supra, 202 N.J. at 445 (quoting Danek v. Hommer, 28 N.J. Super. 68, 77 (App. Div. 1953), aff'd o.b., 15 N.J. 573 (1954)). Claims "that are ambiguously pleaded, but potentially covered," should be read "in a manner that obligates the insurer to provide a defense." Flomerfelt, supra, 202 N.J. at 444; Cent. Nat'l Ins. Co. v. Utica Nat'l Ins. Group, 232 N.J. Super. 467, 470 (App. Div. 1989). When multiple or alternative causes of action are pleaded, "the duty to defend will attach as long as any of them would be a covered claim and it continues until all of the covered claims have been resolved." Flomerfelt, supra, 202 N.J. at 444; Voorhees, supra, 128 N.J. at 174.
This is not a case in which there is a "substantial issue" as to whether the Policy provides coverage for the claims asserted. See Polarome Int'l, Inc. v. Greenwich Ins. Co., 404 N.J. Super. 241, 275 (App. Div. 2008), certif. denied, 199 N.J. 133 (2009). The Policy here provided coverage to DirecTech for "negligent acts or omissions of the Named Insured [Acute] and only for occurrences, claims or coverage not otherwise excluded in the policy." (Emphasis added). Here, plaintiff asserted claims against Acute, DirecTV and DirecTech based on the alleged installation of the cable television service. It is undisputed that Acute installed the service and no one from DirecTV or DirecTech was present at the time. Although plaintiff purportedly asserted a claim against DirecTech based on its own negligence, the complaint indicates that plaintiff also was seeking to impose liability upon DirecTech based on Acute's alleged negligence. Plaintiff alleged in the complaint that DirecTech was liable for the alleged negligence of its "agents, servants and employees[.]" Thus, this claim plainly falls within the scope of "negligent acts or omissions of the Named Insured." Therefore, when we perform the task of laying the policy language and the complaint side by side for comparison, it is clear that the claims asserted in the amended complaint obligated Essex to provide a defense to DirecTech.
We note that the complaint fails to allege any separate claim that DirecTech was negligent in discharging any duty it may have had with respect to the installation, such as a duty to supervise. This case does not, therefore, present the scenario in which some claims are covered and others are not. Even if uncovered claims against DirecTech were asserted, Essex's duty to defend DirecTech, based upon the allegations of Acute's negligence as installer, would attach and continue until all the covered claims were resolved. As the Supreme Court instructed:
In short, in circumstances in which the underlying coverage question cannot be decided from the face of the complaint, the insurer is obligated to provide a defense until all potentially covered claims are resolved, but the resolution may be through adjudication of the complaint or in a separate proceeding between insured and insurer either before or after that decision is reached. [Flomerfelt, supra, 202 N.J. at 447 (emphasis added).]
See also Voorhees, supra, 128 N.J. at 174.
As the Supreme Court observed, there are cases in which it may be appropriate - although not required - to delay a decision on coverage until after a trial on liability. For example, in Burd v. Sussex Mut. Ins. Co., 56 N.J. 383 (1970) the availability of coverage depended upon whether a shooting was intentional or accidental. Id. at 389. This factual dispute placed the interests of the insurer and insured in conflict so that the insurer could not defend the insured "with complete fidelity." Id. at 391. In that circumstance, the Court observed that a declaratory judgment action could be brought, as was done here, or the matter could be decided after a trial in which the carrier and the insured had separate counsel of their own choice. Id. at 393. See also Flomerfelt, supra, 202 N.J. at 446 (rejecting the notion that, under Burd, factual disputes will always require the insured to assume its defense subject to resolution of the coverage issue following trial). The allegations here did not provide a basis for such divided loyalty on the part of the insurer and were susceptible to resolution through a declaratory judgment action, as the parties sought to do.
We therefore conclude that the motion judge erred in finding that Essex's duty to provide a defense was contingent upon a jury determination that Acute was liable and that, in relying upon that ruling, the trial court erred in denying defense costs to DirecTech. We reverse both the orders of December 2, 2007 and September 11, 2009 and remand this matter for a determination and award of reasonable defense costs to DirecTech. In addition, because DirecTech is a successful claimant in its third party action based on a liability insurance policy, the court should determine and award the reasonable fees and expenses incurred in its prosecution of the declaratory judgment action. See R. 4:42-9(a)(6).